Member Article

Voting for mayhem?

Asking an Insolvency Practitioner (IP) any question, which is also addressed to business leaders and entrepreneurs, will inevitably lead to a dichotomy of views, says John Harlow, director of Harlow Insolvency.

It’s a bit like asking an undertaker whether he thinks the invention of an elixir of life would be a good thing or a doctor whether he would like to see the end of all disease. Obviously, although we would all like to live forever and never get ill, we all know that this will never happen. The same thing applies in business; profit is the reward for risk but on occasion events may transpire to result in loss.

As IPs, we rely on businesses and individuals running into financial difficulty or failing, it is our raison d’être. Like the doctor, we have tools at our disposal to help ailing businesses and in some cases turn them around and rescue them. Inevitably, this is not always possible and so, like the undertaker we act to provide a “decent burial”, although this is perhaps better described as an orderly winding-up of the affairs of a company or enterprise.

In short, we are entirely reliant on other’s misfortunes, be it through bad luck, poor management or even on occasion, just plain villainy. So what, therefore, would an IP like to see from the next government? It is far too simplistic to suggest, as many do, that mismanagement of the economy leading to increased business failures, mass unemployment and personal bankruptcy is something we would wish to see. Are we to suppose that IPs check out the candidates and vote for the one perceived to be the most incompetent at running the economy? Would higher taxation and increased interest rates lead to financial meltdown and to orderly queues forming outside IPs offices?

Well, no! Recent history shows that an economy in recession doesn’t necessarily lead to an increase in work for the insolvency profession. We have just been through five years of a very flat economy, clawing our way out of recession at a snail’s pace. Contrary to popular opinion, IPs have been very quiet, a function of creditor leniency and low interest rates, amongst other things.

This has lead to an increase in what has been termed “zombie” businesses, those businesses who can service their debts due to low interest rates and leniency on the part of the banks, but who are not growing. They may represent dead wood which is actually stultifying any recovery, by diverting resources away from stronger businesses.

Yes, we are now seeing some recovery and it is important that whatever happens on May 7th doesn’t have a negative impact on this. Whether this is best achieved by a blue or red tinted government, or a combination of different hues, will be for the electorate to decide and not for me to comment on here. What most practitioners will agree on, however, is that historically, we are always busiest when coming out of a recession. Businesses faced with increased growth often find themselves overtrading and run short of cash. Additional funding isn’t always readily available and sometimes measures need to be taken to protect a business whilst funding is sought or restructuring put in place.

What we want from the next government therefore, are measures which will create a stable, growing economy and increased confidence in the market place. A properly functioning economy will always bring with it the usual problems and difficulties which have always been faced by businesses and individuals and provide opportunities for IPs to use the skills and means at their disposal. In reality, we want what everyone else wants, although …and please keep this to yourselves …a small rise in interest rates wouldn’t go amiss!

This was posted in Bdaily's Members' News section by Laura Jones .